In Praise of Independence: Q&A with Roche's Dan Zabrowski

Roche has always gone its own way: investing in biologics, championing personalized medicine, and checking its ego at the door when doing deals. Now that the rest of Big Pharma has caught on, can a new generation of leaders keep the Swiss giant ahead of its time?

"Roche looks like the best pharma play to me in Europe, if not in the global Big Pharma space," said Nick Draeger, an analyst at Adamant Biomedical Investments, as the Swiss drugmaker announced its '07 results this January. "The company has a solid profile in terms of patent-expiry issues, and it is still the leading company in oncology."

Draeger's enthusiasm may betray a slight hometown bias—Adamant and Roche are both headquartered in Basel, Switzerland—but industry analysts agree that Roche is on a remarkable roll.

In 2007, Roche posted sales of $42.1 billion with 10 percent growth—the highest in the industry. (For more on Roche's financials, see the box at right.) It remains the uncontested global leader in oncology, pharma's hottest field, and its two breakthrough monoclonal antibody (mAB) products, Herceptin (trastuzumab) and Avastin (bevacizumab), drove almost 50 percent of its revenue. But topping sales, at $5 billion, was a third Genentech mAB—Rituxan (rituximab), currently approved for lymphoma, set for approval for rheumatoid arthritis, and showing strong effects against multiple sclerosis and a host of other B-cell-related diseases.

For the first time, Roche even beat hometown rival Novartis in sales by $2.4 billion—sweet revenge over the powerhouse that only eight years ago was said to be on the verge of taking over a weakened Roche.

At a time when drug giants face the prospect of losing up to half their current sales when their megablockbusters go off patent in 2011 and 2012, and companies are scrambling to buy enough late-stage drugs to staunch the revenue hemorrhage, Roche has escaped the prevailing panic. According to Lehman Brothers, patent expirations will cost the company only 11 percent of sales between 2008 and 2012. Most of its leading growth drivers were approved within the past five years. (For a list of Roche's top-selling drugs, see the box.)

But robust productivity alone hasn't given Roche the luxury of staying focused on a future beyond the patent cliff. Its pioneering strategy of investing in promising biotechs, starting in 1988 when Roche paid $2.1 billion for 60 percent of Genentech, has delivered a portfolio rich in biologics. And its famously arm's-length approach to managing Genentech and Chugai has preserved their entrepreneurial spirit and innate culture, earning Roche the status of biotech's most-favored partner. What's more, as the longtime global leader in diagnostics, Roche enjoys a head start over its richer competitors in the race for personalized medicine.

In many ways, the self-proclaimed "world's biggest biotech" looks a lot like the new business model that other pharmas are downsizing, restructuring, and licensing their way toward. Yet Roche didn't set out to be ahead of its time. The family-controlled firm apparently just never felt compelled to follow the pack—an independent streak that was paradoxically easy to ignore in a pack as obdurately conformist as Big Pharma. Above all, Roche never went in for '90s-style megamergers that promised much but delivered little.

At Roche's analyst meeting, CEO Franz Humer, who deserves credit for the company's turnaround, remarked tellingly that Roche was now solid enough "to maintain its independence for another 50 years." This month, as he hands the reins to protégé Severin Schwan—who, at 40, is the industry's youngest CEO—the challenge couldn't be clearer. Now that the rest of Big Pharma is rushing to buy up biotechs for products, platforms, and partnerships, can the Swiss juggernaut remain first among equals while making good on its promise of personalized medicine?

A DEALER AT HOME IN THE PIPELINE

M&As have become the new R&D, and Roche is, by default, ahead of its time in this way too. Only a handful of its most innovative and profitable drugs were developed in-house. From Genentech's treasure trove of oncology mABs to Chugai's hot, new Actemra (tocilizumab) for rheumatoid arthritis to the late-stage diabetes and cholesterol NMEs, partnering has long been the key to Roche's success. And that makes Dan Zabrowski, who was tapped last July as global head of pharma partnering, the man to meet.